Integrated Reporting could help answer the ‘value’ question

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The competition to find a comprehensive and accessible way to gauge a university’s value has a new entrant. Matt Sisson explains why BUFDG is championing Integrated Reporting as the way forward.

One of the perhaps unintended consequences of the changes to the HE funding model over the last 20 years has been the increased interest from a broader number of stakeholders into how universities are run. In more recent years, public sector austerity, coupled with the large jump in tuition fees has made this question more specific: it is no longer just “How is the university run?”, but “How does it spend its / my money?”.

A university running at a loss in any given year could be a worrying sign; or it may not be.

In the past, these questions will have come from governors, and maybe government or the funding councils, but now they also come from students, parents, the press, the local community, and often the university’s own staff.

Good value means different things

Universities face a real challenge in communicating to these varied stakeholders, who can have very different interests, to prove that the university offers value for money. What ‘good value’ means to a student is very different than to a governor or regulator.

To address this, a university will have typically pointed stakeholders with a responsibility for governance to its annual financial statements. The problem is that financial statements are merely snapshots in time, and they require financial expertise and an understanding of the wider context to make sense of. For example, a university running at a loss in any given year could be a worrying sign; or it may not be, depending on where the university is in its strategic or investment cycle, and in the absence of a myriad of other possible contextual indicators.

Students, their parents, and alumni on the other hand may well receive glossy prospectuses, university magazines, or colourful ‘annual reports’. Traditionally these are mainly promotional or marketing exercises, and aren’t very helpful in answering either of the questions of how a university is run, or whether it spends its money well.

Working towards a third way of reporting

Many organisations, particularly in the private sector, have been working towards a third way. They’re responding to similar pressures by adopting an internationally-recognised method of corporate finance and value reporting called Integrated Reporting (IR).

An integrated report differs from other reports and communications. It focuses on the ability of an organisation to create value in the short, medium and long term. To do this, it encourages a strategic, forward focus and connectivity of information. It also requires an organisation to consider not just its financial resources, but five other ‘capitals’ which include: intellectual, social, and natural resources, and the relationship between them.

Read more: VFM ‘It’s about the value not the money’, argues Simon Perks

In short, integrated reporting encourages integrated thinking within the organisation and shows, in an accessible and balanced way, not just what the organisation achieves, but how it operates. It is little surprise then that many universities are now working towards the IR standard as well. Here at BUFDG we’ve been supporting and encouraging universities to think about how it could help them.

Last year, we reviewed the annual reports of seven universities to understand how well they adopted some of the principles of IR, and the review helped inform the universities’ latest publications. This year, BUFDG has signed an agreement with the International Integrated Reporting Council (IIRC) to work with four HEIs to review their 15/16 annual reports and financial statements.

The project, concluding with its report in summer 2017, aims to highlight where the universities have made progress and to encourage others to adopt the IR framework. The four institutions involved in the second stage of this project are the University of Edinburgh, Bangor University, Newcastle University and the University of Winchester.

To supplement it, we’re working with the Chartered Institute of Public Finance Accounting (CIPFA) on its IR international working group, to explore how IR can be applied in public sector organisations. We’re also keen to hear from anyone in the sector who would like help in implementing or encouraging IR in their institution, or who simply wants to know more about it.

It’s too soon in the project cycle to assess whether it will be an unqualified success, but anecdotal reports from institutions already implementing the framework suggest that IR has a beneficial impact – not just in communicating to different stakeholders how universities deliver value, but in helping them run in a more efficient and sustainable manner.

If you’re interested in finding out more about IR and how to implement it, contact Matt@bufdg.ac.uk.

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Matt Sisson
Projects and communications manager, BUFDG

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